Ways and Means Committee advances tax, IRS modernization and nonprofit disclosure bills

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Tax, IRS modernization bills

Highlights

The Ways and Means Committee advanced a tax package addressing penalties for hostages, private-sector fraud losses, AI tax enforcement, and National Taxpayer Advocate participation in litigation.
The Tax Exempt Hospital Transparency Act, approved 25-15, would require large nonprofit hospitals with over 100 beds or $100 million in net patient revenue to submit detailed new annual disclosures.
IRS modernization bills mandate a data science fellowship, analytics task force, and pilot programs for AI in fraud detection, aiming to strengthen compliance, taxpayer rights, and sector transparency.

Committee package targets tax administration gaps

As reported by the House Committee on Ways and Means, the legislation approved by the committee addresses penalties on former hostages, losses tied to private-sector fraud, the use of artificial intelligence in tax enforcement, and the ability of the National Taxpayer Advocate to participate in court cases affecting taxpayers.

The package includes the End Tax Penalties on American Hostages Act, which passed 40-0 and would give the IRS additional tools to prevent penalties for late tax payments linked to captivity abroad. It also includes the Tax Relief for Fraud Victims Act, approved 39-0, which would loosen limits on deductions for theft and casualty losses tied to fraud, extend filing timeframes for related claims, and create special rules for retirement-plan distributions connected to fraudulent theft losses.

Lawmakers also approved the AI Tax Integrity Act of 2026 by a 40-0 vote, requiring the Treasury Secretary to establish a pilot program using AI to identify inaccurate returns related to identity theft, fraudulent claims and improperly prepared filings. The Taxpayer Workforce Modernization Act passed 24-16 and would require the IRS to create a fellowship program for data scientists and technology specialists, along with a task force to support analytics, training and reviews of current AI use.

Two additional bills focus on taxpayer rights in disputes and return-preparer misconduct. The Protecting Taxpayers from Ghost Preparers Act passed 40-0 and would clarify that the exception to the normal statute of limitations for fraudulent returns applies only when the taxpayer seeks to evade tax obligations, while the Taxpayer Advocate Participation Act passed 39-0 and would allow the National Taxpayer Advocate to appear as amicus curiae in U.S. federal tax cases.

Hospital disclosure rules and sector implications

The committee also approved the Tax Exempt Hospital Transparency Act by a 25-15 vote, adding reporting requirements for nonprofit hospitals that receive tax benefits. The measure would require additional facility-level disclosures, with added obligations for large tax-exempt hospitals with more than 100 inpatient beds or more than $100 million in net patient revenue.

Required disclosures under the bill include a CMS certification number for each hospital facility, the value of financial assistance provided, the number of completed aid applications received, granted and denied, and spending tied to the three highest-priority health needs identified in the latest Community Health Needs Assessment. Hospitals would also need to report spending on quality improvement, nonclinical programming and advertising, as well as provide information on health service lines and the 340B drug discount program.

Committee Chairman Jason Smith says the package is aimed at correcting weaknesses in tax administration, improving service quality and increasing accountability for organizations benefiting from tax-exempt status. The proposals now frame a broader policy push that links taxpayer service, fraud controls and nonprofit oversight to IRS technology upgrades and transparency standards across the healthcare sector.

In our earlier coverage of the House Ways and Means Committee’s tax administration package, we outlined seven bills aimed at strengthening taxpayer rights, improving IRS operations, and expanding transparency requirements for tax-exempt hospitals. The measures included deadline relief for Americans held hostage abroad, broader theft-loss deductions for fraud victims, an AI pilot to spot inaccurate or fraudulent returns, tougher rules for ghost preparers, and more detailed charity-care disclosures to increase oversight of nonprofit hospital practices.

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